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Japan eyes missile defense budget

North Korea's 1998 ballistic missile test shocked Japan.
North Korea's 1998 ballistic missile test shocked Japan.

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(CNN) -- Japan is cutting next year's budget for its controversial missile defense system to 100 billion yen (about $930 million), according to a Japanese media report.

But the cutback reflects the yen's strength against the dollar more than any scaling down of plans for the ambitious system. A stronger yen makes it cheaper for Japan when it buys military equipment from the United States.

Earlier this year Japan said it would spend up to 1 trillion yen ($9.3 billion) over the next eight years on the project, which is designed to protect Tokyo and other big cities from possible attacks by North Korean ballistic missiles.

The U.S.-made system is to consist of SM-3 interceptor missiles deployed on Aegis warships in the Sea of Japan, backed up by land-based Patriot-3 surface to air missiles.

The Defense Agency initially sought a budget of about 142 billion yen (about $1.3 billion) for the financial year to March 2005, but a report in the Nihon Keizai business daily Tuesday says the government is trimming this figure back to 90 to 100 billion yen.

According to the report, the Finance Ministry wants to cut the budget because of the yen's appreciation against the dollar.

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The Defense Agency based its request on an exchange rate of 118 yen in August, but the dollar is trading in Tokyo Tuesday at 107.72 yen. That is close to the dollar's three-year low of 106.82 yen touched on December 9.

The United States has been pressing Japan to beef up its anti-missile defenses, citing the threat from North Korea's Rodong ballistic missile, which is capable of reaching any part of Japan.

In 1998, North Korea shocked Tokyo by firing a long-range missile that flew over Japan and plunged into the Pacific Ocean.

During a visit to the United States in May, Japanese Prime Minister Junichiro Koizumi said the government would accelerate moves to acquire the defense system.

In July, Defense Agency officials said they hoped to acquire four Aegis warships equipped with interceptor missiles and high-tech radar.

This is designed to be the first stage of the defense system and aims to intercept missiles in space.

The agency's timetable calls for partial introduction of the system in early 2007 and to be fully operational in 2011.

According to the Nihon Keizai report, the government will hold a security council meeting on Friday to confirm plans for the system.

On Saturday the Ministry of Finance is expected to present its draft budget for the year beginning next April. This is expected to show a 1 percent fall in defense spending to 4.9 trillion yen (about $46 billion).

Critics of the Defense Agency plans say the missile technology has yet to be proven effective.

The Koizumi administration has shown a willingness to align Japan with the United States on defense matters.

Later this month, the first Japanese non-combat troops are expected to leave for the Iraq area, where they will be involved in supporting the U.S.-led coalition forces there.

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